retail news in context, analysis with attitude

Interesting confluence of stories this weekend…

VentureBeat reports that Instacart has raised “ $200 million in venture capital,” and that “the funding comes just a few days after reports that Amazon is testing delivery from the Whole Foods stores it swallowed last year.” The goal of the funding is to help Instacart gird for the ongoing battle with Amazon.

The other story was in the Buffalo News: “When Instacart launched in Buffalo over the summer, it paid its contractors $10 for every order they delivered, plus 40 cents per item they shopped. Now, those contractors receive $4.75 per delivery and 40 cents per item. Instacart also now has embedded contractors who only shop orders at some stores. Contractors who pick up those orders and deliver them receive a flat $4.”

The story notes that Instacart “has said it offers elevated rates when it first launches its platform in a new region in order to attract more contractors.”
KC's View:
Contractors who, I imagine, must not be thrilled when they see a pay cut of more than 50 percent per order. Retailers that do business with Instacart, it seems to me, should be concerned that dissatisfaction with Instacart could bleed into the level of service they provide to shoppers. If the service is lessened or the interactions are brusque, the dissatisfied customers aren’t going to blame Instacart. They’re going to blame the retailer.

I’ve argued for a long time that retailers are taking a big risk by outsourcing the delivery function to a third party that is more worried about maintaining its own numbers for an eventual sale than it is about providing great customer service. This sort of illustrates my point.

As for the new funds it has raised … I had to chuckle at what VentureBeat wrote:

The new funding reportedly values Instacart at $4.2 billion, and comes less than a year after it raised $400 million at a $3.4 billion valuation. The company has now raised $900 million total. The founders of Webvan could not be reached for comment.

Cheeky. But pretty funny.